The Asia Pacific
Fund, Inc.
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- -------
Semi-Annual Report
September 30, 1998
<PAGE>
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The Asia Pacific Fund, Inc.
As of September 30, 1998 (Unaudited)
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OUR NEW TOLL-FREE LINE:
1-888-4-ASIA-PAC
For further information on the Fund, please call. In
addition, the Fund makes
available monthly portfolio information. If you would like
to receive this
information please call the toll-free number indicated
above.
Statistics
- -------------------------------------------
Total Net Assets $126,707,334
Shares Outstanding 18,930,333
Equity and Equivalent
Securities 86.0%(a)
Other 14.0%(a)
Total Returns
- -------------------------------------------------
Market
Period Price(b) NAV(c)
6 months ended 9/30/98 (44.4)% (27.2)%
1 Year ended 3/31/98 (16.1)% (29.9)%
3 Years ended 3/31/98 (28.9)% (25.4)%
5 Years ended 3/31/98 1.5% 16.4%
10 Years ended 3/31/98 257.2% 199.1%
Other Information
- ------------------------------------------------
Ticker Symbol APB
Primary Exchange NYSE
Dividend Repurchase Program Yes
- ------------------------------------------------
Footnote section
(a) Expressed as a percentage of total
investments.
(b) Total investment return is calculated
assuming a purchase of common stock at the
current market value on the first day and a
sale at the current market value on the last
day of each fiscal period reported.
Dividends and distributions are assumed, for
purposes of this calculation, to be
reinvested at prices obtained under the
Fund's dividend reinvestment plan. These
calculations do not include brokerage
commissions.
(c) This information represents the historical
net asset value per share performance of The
Asia Pacific Fund, Inc. 'Net asset value per
share performance' has been computed by the
Investment Manager and, because it does not
reflect market price, is not the same as
'total investment return.'
Portfolio Characteristics
(As of September 30, 1998)
- -----------------------------------------------------
Top Ten Long-Term Holdings
(% of Total Long-Term Investments)
- -----------------------------------------------------
Hutchinson Whampoa, Ltd. 6.7%
Hong Kong Telecommunications, Ltd. 5.6%
China Light & Power Co., Ltd. 5.4%
Formosa Growth Fund 4.6%
Singapore Telecommunications, Ltd. 3.8%
Singapore Press Co. 3.7%
Cheung Kong Holdings, Ltd. 3.6%
ROC Taiwan Fund 3.2%
China Telecom 3.0%
President Chain Store 2.8%
- ------------------------------------------------------
Long-Term Country Weightings
(% of Total Long-Term Investments)
- ------------------------------------------------------
(PIE CHART)
Hong Kong 41.4% India 5.2%
Taiwan 18.3% Malaysia 3.5%
Singapore 15.2% Thailand 3.1%
South Korea 6.6% Indonesia 1.1%
The Philippines 5.6%
- -----------------------------------------------------
Sector Breakdown: Top Ten Industries
(% of Total Long-Term Investments)
- -----------------------------------------------------
Telecommunications 20.7%
Diversified Funds 11.3%
Electronics 11.2%
Utilities 9.4%
Conglomerates 6.7%
Real Estate - Developers 5.7%
Food & Beverage 5.3%
Printing & Publishing 3.8%
Banking 3.5%
Insurance 2.9%
1
<PAGE>
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REPORT OF THE INVESTMENT MANAGER
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PERFORMANCE
Over the period under review the Fund's net asset
value (NAV) per share
decreased by $2.50 from $9.19 to $6.69. In percentage terms
the Fund's total
return performance over the last six months was (27.2)%.
This compared with its
relevant benchmark index return, the combined Far East Free
ex-Japan, of
(38.5)%.
As of September 30, 1998 annualized performance on a net
asset value,
dividend reinvested basis since inception was 5.4%.
Asian currencies stabilized in the period under review. A
combination of
strong trade surpluses, falling concerns over inflation and
evidence of foreign
direct investment led to gains in the Thai Baht and
Indonesia Rupiah. The
Philippine Peso and Malaysia Ringgit, however, fell as
concerns grew over the
political climate in these countries. At the market level,
performance was
mixed, with Thailand and South Korea posting positive
returns, as investors
believed these nations were the first into the crisis and
would be the first to
come out of the Asian recession, helped by the steadying
hand of the
International Monetary Fund (IMF) Malaysia, Indonesia and
the Philippines all
fell over 20%, as foreign investors withdrew funds from
these markets as their
economic and earnings outlook continued to deteriorate.
Elsewhere, Singapore and
Hong Kong produced small negative returns but were highly
volatile over the
period. They experienced sharp falls in July and August, but
recovered sharply
in September.
Local Currencies vs. the U.S. Dollar
<TABLE>
<CAPTION>
March 31, September 30, Change
%
--------- ------------- ------
- --
<S> <C> <C> <C>
Currency
US$/local rate
North Asia
Hong Kong Dollar 7.748 7.75
0.0
Korean Wan 1,385 1,391 -
0.4
New Taiwan Dollar 32.9 34.37 -
4.4
ASEAN
Indonesian Rupiah 8,650 10,000 -
19.2
Malaysian Ringgit 3.64 5.43 -
33.0
<CAPTION>
March 31, September 30, Change
%
--------- ------------- ------
- --
<S> <C> <C> <C>
Philippine Peso 37.9 43.75 -
13.4
Singapore Dollar 1.62 1.68 -
4.1
Thai Baht 39.3 39.53 -
0.7
India Rupee 39.48 42.40 -
6.9
</TABLE>
Stock Market Performance
April 1, 1998 to September 30, 1998
<TABLE>
<CAPTION>
Market Change % Market Change %
Country - Index Local US Dollar
- ----------------------- --------------- ---------------
<S> <C> <C>
North Asia
MSCI Hong Kong -28.5 -28.5
MSCI Korea -29.7 -30.0
MSCI Taiwan -29.2 -32.3
ASEAN
MSCI Indonesia Free -58.2 -66.2
MSCI Malaysia Free -52.3 -68.0
MSCI Philippine Free -39.1 -47.2
MSCI Singapore Free -35.0 -37.6
MSCI Thailand Free -49.3 -49.7
MSCI India -25.9
MSCI Combined Far East
Free Ex-Japan -38.5
</TABLE>
* Source: Datastream
COUNTRY ALLOCATION*
<TABLE>
<CAPTION>
March 31 April 30 May 31 June 30
July 30 Aug. 30 Sept. 30
Country % % % %
% % %
- ------------- --------- --------- ------- --------
- -------- -------- ---------
<S> <C> <C> <C> <C>
<C> <C> <C>
North Asia 66 63 60 62
59 54 66
Hong Kong 44 43 42 42
38 32 35
South Korea 6 7 6 6
6 6 6
Taiwan 14 13 12 14
15 16 15
ASEAN 27 27 28 24
25 22 26
Indonesia 1 1 1 1
1 1 1
Philippines 4 4 4 4
4 4 5
Malaysia 7 7 7 5
5 3 4
Singapore 12 12 13 12
12 12 13
Thailand 3 3 3 2
3 2 3
India 1
2 3 4
- - - -
- - - -
Cash 7 10 12 13
14 21 14
- - - -
- - - -
- - - -
- - - -
</TABLE>
* Rounded up to nearest whole number.
ASSET ALLOCATION
Asset allocation during the second quarter of 1998 has
been left broadly the
same. North Asia remains the area of preference (over
ASEAN). Within Southeast
Asia, Singapore accounts for almost half the Fund's
weighting. Malaysia was
significantly reduced
2
<PAGE>
at the end of May, as the Manager became increasingly
concerned over the
economic policy the government is pursuing. Also, in the
month of June the Fund
opened a small position in India taking advantage of that
market's recent sharp
sell-off that had been triggered by its nuclear tests.
Finally, the Fund
steadily rebuilt its cash position over the period.
The main strategy of the Fund was maintained during the
third quarter. North
Asia is preferred over ASEAN, while a relatively high cash
position is deemed
appropriate in this period of high volatility. Exposure to
Hong Kong was reduced
in July and August due to concerns that the authorities'
market intervention was
ill advised. Overall, Taiwan, the Philippines and India
received net investment
flows over the period, while Hong Kong and Malaysia were
reduced. The weighting
to India was increased after the market's recent weakness
and on the assumption
that the market should be relatively insulated from the
volatility in the
world's financial markets.
RECENT SECTOR & STOCK STRATEGY
The Fund maintains its year-long strategy of favoring
defensive and
non-interest rate sensitive sectors like utilities,
telecommunications and
low-end consumer stocks, as well as those benefiting from
currency devaluation,
such as electronics and soft commodity companies (companies
concerned with
non-metallic, chiefly agricultural and raised product
commodities). The Manager
remains negative on negative rate sensitive, capital
intensive and highly
leveraged sectors such as banks, property, automobiles,
petrochemicals and
conglomerates.
In the period under review the most significant change in
stock selection has
been in Hong Kong. There, the main blue chip stocks have
been reduced at the
expense of non-index, medium sized, less interest rate
sensitive companies. The
biggest change was in HSBC, which has been reduced from
almost 6% to less than
1% of the portfolio. Less severe reductions were made in
Cheung Kong and Sun
Hung Kai Properties. New additions to the Hong Kong
portfolio include Li & Fung,
Varitronix, Ng Fund Hong and IDT International. Elsewhere in
the portfolio two
Indian funds (Indosuez Himalayan Fund and India Fund, Inc.)
were purchased; both
are trading at discounts of over 25% to their net asset
values. The Taiwanese
holdings were also increased, with purchases including
Asustek Computer and
President Chain Store, while exposure to the Taiwanese funds
was reduced.
OUTLOOK
'Change,' almost by definition is disruptive and painful.
Asia is undergoing
a period of change and those countries that have the
flexibility to negotiate
this process will be rewarded favorably by investors.
Change, however, is being
slowed by vested interests that are fighting a strong rear
guard action and are
carrying the middle class with them. The likes of Malaysian
Prime Minister, Dr.
Mohammad, blaming the speculators for the country's economic
and market problems
are effectively 'shooting the messenger.' Change needs to
occur and the problem
with intervention (whether it be in the market, as is the
case with Hong Kong,
or in the form of capital controls, as with Malaysia) is
that it creates rigged
markets. False markets, in turn, give false information,
hence slowing or
preventing change. The Manager, therefore, takes a dim view
of recent actions by
the authorities in Asia which are reflected in the slower
than previously
expected recovery in the region.
Not all the countries in Asia are afflicted to the same
extent by the
economic problems. The divergence between the good (Taiwan,
Hong Kong and
Singapore) and the bad (Malaysia and Indonesia) will magnify
in the coming
quarters. The 'micro situation' is also increasingly
important, as companies
will have to be flexible enough to deal with the 'New Asia'.
In this regard the
Manager is confident that the Fund will add significant
value through time.
In a previous review the Manger wrote:
'The external environment is likely to be primarily
responsible for driving
these [Asian] markets from here. The factors to monitor
closely will be
direction of the Japanese Yen, events on Wall Street and the
outlook for the
Chinese economy'.
We continue to be relatively sanguine on the outlook for
China, while
volatility on Wall Street has
3
<PAGE>
been greater than expected, although the almost universally
bearish sentiment on
equities, the recent easing actions by the Federal Reserve
and the recent
correction in the Dow, suggest that a crash is unlikely to
be imminent. The
reversal of dollar strength, the easier global interest rate
environment and
further financing packages to Asia from Japan will be
positive for the Asian
markets as the debt burden is alleviated. This has led to a
sharp rally in
recent weeks, which is fueled further by the high cash
positions of funds
investing in the region. The Manager will be careful not to
chase these markets
too aggressively as the hard work (refinancing) has yet to
occur, although the
bottom of the markets may have been seen in recent months.
The Manager expects
range bond trading in the coming quarters and looks to take
advantage of what
are anticipated to be large fluctuations in share movements.
James Squire
Baring International Investment (Far East) Limited
Hong Kong
November 6, 1998
4
<PAGE>
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THE ASIA PACIFIC FUND, INC.
Portfolio of Investments
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------
Value
Shares Description (Note 1)
- -------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--83.7%
Hong Kong--34.6%
541,000 Asia Satellite Telecom $ 666,781
Holdings, Ltd. ...........
(Telecommunications)
840,000 Cheung Kong Holdings, Ltd. 3,891,850
..........................
(Real Estate-Developer)
1,200,000 Cheung Kong Infrastructure 2,601,794
..........................
(Investment Company)
1,180,000 China Light & Power Co., Ltd. 5,756,469
.
(Utilities)
2,000,000 China Telecom .............. 3,148,997
(Telecommunications)
200,000 Hang Seng Bank, Ltd. ....... 1,264,761
(Banking)
2,144,100 Hong Kong and China Gas .... 2,628,760
(Utilities)
500,000 Hong Kong Electric Holdings 1,719,688
..........................
(Electronics)
1,225,600 Hong Kong International, Ltd. 379,614
..........................
(Real Estate-Developer)
3,003,600 Hong Kong Telecommunications, 5,911,454
Ltd. .....................
(Telecommunications)
59,800 HSBC Holdings, PLC ......... 1,095,902
(Banking)
74,000 Hung Hing Print Group ...... 24,592
(Printing & Publishing)
1,354,000 Hutchison Whampoa, Ltd. .... 7,129,535
(Conglomerate)
5,932,000 IDT International, Ltd.(a) 620,110
..........................
(Manufacturing)
550,000 Li & Fung, Ltd. ............ 887,268
(Distribution/Wholesalers)
1,766,000 Ng Fung Hong, Ltd(a) ....... 1,492,844
(Food & Beverage)
750,000 Smartone Telecommunications 2,047,170
..........................
(Telecommunications)
500,000 Sun Hung Kai Properties, Ltd. 1,771,311
..........................
(Real Estate-Developer)
441,000 Varitronix International, 856,559
Ltd. ..................... ------------
(Manufacturing)
43,895,459
------------
<CAPTION>
- -------------------------------------------------------
Value
Shares Description (Note 1)
- -------------------------------------------------------
<C> <S> <C>
India--4.3%
50 Bombay Suburban Electric $ 187
Supply .
(Utilities)
540 ICICI, Ltd. ................ 677
(Industrial)
400,000 India Fund, Inc. ........... 2,475,000
(Diversified Funds)
160,000 Indosuez Himalayan Fund N.V. 1,184,000
.
(Diversified Funds)
50 Larsen & Toubro, Ltd. ...... 217
(Machinery)
100,000 Mahanagar Telephone Nigam, 1,187,500
Ltd.
(Telecommunications)
40,000 Pentafour Software & Exports, 640,000
Ltd.(a) ...................
(Information Technology)
60 Reliance Industries, Ltd. 168
.......................... ------------
(Textiles)
5,487,749
------------
Indonesia--0.9%
1,483,500 Gudang Garam ............... 793,742
(Tobacco)
50,000 Gulf Indonesia Resourses, 412,500
Ltd.(a) . ------------
(Oil & Natural Gas
Production)
1,206,242
------------
Malaysia--3.0%
483,000 Berjaya Sports Toto ........ 311,986
(Leisure)
1,995,000 IOI Corp. .................. 610,909
(Plantations)
851,000 Malaysian Pacific Industries 692,201
..........................
(Electronics)
122,000 Rothmans of Pall Mall Berhad 430,794
..........................
(Tobacco Manufacturer)
633,000 Tanjong Co., Ltd. .......... 507,308
(Utilities)
934,500 Telekom Malaysia Berhad .... 1,207,249
(Telecommunications) ------------
3,760,447
------------
</TABLE>
See Notes to
Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Value
Shares Description (Note 1)
- -------------------------------------------------------
<C> <S> <C>
The Philippines--4.7%
130,000 Bank of Philippines Island $ 144,114
..........................
(Banking)
585,058 Manila Electric Company 'B' 1,116,625
..........................
(Utilities)
125,000 Philippine Long Distance 2,507,812
Telephone (ADR) ..........
(Telecommunications)
893,300 San Miguel Corp. 'B' ....... 1,153,633
(Food & Beverage)
8,000,000 SM Prime ................... 987,429
(Retail) ------------
5,909,613
------------
Singapore--12.7%
700,000 Natsteel Electronics, Ltd. 1,535,270
..........................
(Electronics)
480,600 Overseas-Chinese Banking 1,207,910
Corp., Ltd. ..............
(Banking)
600,000 Parkway Holdings, Ltd. ..... 689,982
(Health Care)
450,000 Singapore Airlines ......... 2,467,398
(Airlines)
480,220 Singapore Press Co. ........ 3,985,228
(Printing & Publishing)
2,389,000 Singapore Telecommunication, 3,993,468
Ltd.
(Telecommunications)
1,000,577 S.T. Engineering(a) ........ 960,838
(Engineering)
420,000 Venture .................... 1,294,606
(Electronics) ------------
16,134,700
------------
South Korea--5.5%
32,000 Hyundai Heavy Industry ..... 478,591
(Ship Building)
160,000 Medison Co., Ltd. .......... 1,587,632
(Medical Equipment)
31,460 Pohang Iron & Steel Co. .... 997,581
(Iron & Steel)
23,548 Samsung Display Devices .... 550,286
(Electronics)
128,355 Samsung Electronics Co. .... 2,288,850
(Electronics)
5,553 Samsung Fire & Marine 1,078,059
Insurance Co. ............ ------------
(Insurance)
6,980,999
------------
<CAPTION>
- -------------------------------------------------------
Value
Shares Description (Note 1)
- -------------------------------------------------------
<C> <S> <C>
Taiwan--15.4%
260,236 Asustek Computer, Inc. ..... $ 1,811,321
(Computer Products)
713,400 Cathay Life Insurance ...... 1,998,348
(Insurance)
700,000 D Link ..................... 1,503,628
(Electronics)
271,000 Formosa Growth Fund(a) ..... 4,926,780
(Diversified Funds)
1,014,400 President Chain Store Corp. 2,959,280
..........................
(Food & Beverage)
560,250 ROC Taiwan Fund ............ 3,396,516
(Diversified Funds)
850,000 Taiwan Semiconductor 1,628,447
Manufacturing Co. ........
(Electronics)
533,400 Yung Shin Pharmaceutical Co. 1,238,665
. ------------
(Pharmaceuticals)
19,462,985
------------
Thailand--2.6%
228,300 Advanced Info Service PCL 1,304,572
..........................
(Telecommunications)
182,900 Banpu Public Co., Ltd. ..... 393,085
(Mining)
230,000 Hana Microelectronics ...... 657,143
(Electronics)
80,000 PTT Exploration & Production 703,919
.
(Exploration & Production)
225,117 Regional Container Lines PCL 227,678
. ------------
(Shipping)
3,286,397
------------
Total long-term investments
(cost $134,414,724)........ 106,124,591
------------
SHORT-TERM INVESTMENTS--13.7%
Units Index Linked Notes--1.2%
- --------
Taiwan
Barclays Capital
11 (Financial Services) ....... 1,039,633
Zero Coupon, 08/03/99
BZW Warrants, Ltd.
50 (Financial Services) ....... 414,863
Zero Coupon, 11/11/98 ------------
Total index linked notes
(cost $1,655,046).......... 1,454,496
------------
</TABLE>
See Notes to
Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Value
Units Description (Note 1)
- -------------------------------------------------------
<C> <S> <C>
Rights(a)
Taiwan
0 Asustek Computer, Inc.
(Computer Products)
Expiring Oct 1998
(cost $0).................. $ 139
------------
<CAPTION>
Principal
Amount
(000) Repurchase Agreement--12.5%
- --------
<C> <S> <C>
United States
US$15,871 State Street Bank & Trust
Co., 4.75%, dated 9/30/98,
due 10/1/98 in the amount
of $15,873,094; (cost
$15,871,000; collateralized
by $10,895,000 U.S.
Treasury Notes, 13.75%, due
5/15/14, value including
accrued
interest-$16,194,393)...... 15,871,000
------------
Total short-term investments
(cost $17,526,046)......... 17,325,635
------------
Total Investments--97.4%
(cost $151,940,770; Note
3)......................... 123,450,226
Other assets in excess of
liabilities--2.6%.......... 3,257,108
------------
Net Assets--100%............. $126,707,334
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt
- ----------------------------------------------------------
THE ASIA PACIFIC FUND, INC.
Statement of Assets and Liabilities
September 30, 1998
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments, at value (cost
$151,940,770)........................ $123,450,226
Cash, including foreign currency (cost
$775,785)............................ 787,500
Receivable for investments sold........ 2,342,848
Dividends and interest receivable...... 549,247
Other assets........................... 54,293
------------
Total assets......................... 127,184,114
------------
Liabilities
Accrued expenses....................... 239,162
Investment management fee payable...... 94,299
Deferred Thailand capital gains tax
liability............................ 71,082
Foreign withholding taxes payable...... 35,803
Administration fee payable............. 24,848
Payable for investments purchased...... 11,586
------------
Total liabilities.................... 476,780
------------
Net Assets............................. $126,707,334
------------
------------
Net assets comprised:
Common stock, at par................. $ 189,303
Paid-in capital in excess of par..... 220,845,091
------------
221,034,394
Distributions in excess of net
investment income.................... (2,484,404)
Accumulated net realized losses on
investment and foreign currency
transactions......................... (63,281,877)
Net unrealized depreciation on
investments and foreign currencies... (28,560,779)
------------
Net assets, September 30, 1998......... $126,707,334
------------
------------
Net asset value per share
($126,707,334 3 18,930,333 shares of
common stock issued and
outstanding)......................... $6.69
------------
------------
</TABLE>
See Notes to Financial Statements. See Notes to
Financial Statements.
7
<PAGE>
- ----------------------------------------------------------
THE ASIA PACIFIC FUND, INC.
Statement of Operations
Six Months Ended September 30, 1998
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Net Investment Income
Income
<S> <C>
Dividends (net of foreign withholding
taxes of $116,239)................. $ 1,869,834
Interest............................. 405,416
------------
Total income....................... 2,275,250
------------
Expenses
Investment management fee............ 636,417
Administration fee................... 173,426
Custodian's fees and expenses........ 142,000
Reports to shareholders.............. 113,000
Legal fees and expenses.............. 75,000
Directors' fees and expenses......... 42,000
Audit fees and expenses.............. 22,000
Transfer agent's fees and expenses... 15,000
Registration expenses................ 11,000
Miscellaneous........................ 36,558
------------
Total expenses................... 1,266,401
------------
Net investment income................ 1,008,849
------------
Realized and Unrealized Loss on
Investments and Foreign Currency
Transactions
Net realized loss on:
Investment transactions.............. (20,386,633)
Foreign currency transactions........ (279,595)
------------
(20,666,228)
------------
Net change in unrealized depreciation
on:
Investments (net of change in
deferred Thailand capital gains
taxes of $2,035)................... (27,641,808)
Foreign currencies................... (12,416)
------------
(27,654,224)
------------
Net loss on investments and foreign
currencies........................... (48,320,452)
------------
Net Decrease in Net Assets
Resulting From Operations.............. $(47,311,603)
------------
------------
</TABLE>
- ----------------------------------------------------------
THE ASIA PACIFIC FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) September 30, March 31,
in Net Assets 1998 1998
------------- ------------
<S> <C> <C>
Operations
Net investment
income............... $ 1,008,849 $ 2,180,947
Net realized loss on
investments and
foreign currency
transactions......... (20,666,228) (42,638,640)
Net change in
unrealized
depreciation on
investments and
foreign currencies... (27,654,224) (35,365,964)
------------- ------------
Net decrease in net
assets resulting from
operations........... (47,311,603) (75,823,657)
Dividends from net
investment income...... -- (2,180,947)
Distributions in excess
of net investment
income................. -- (3,036,251)
Dividends from net
realized gains......... -- (7,825,857)
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions.......... -- 192,890
------------- ------------
Total decrease........... (47,311,603) (88,673,822)
Net Assets
Beginning of period...... 174,018,937 262,692,759
------------- ------------
End of period............ $ 126,707,334 $174,018,937
------------- ------------
------------- ------------
</TABLE>
See Notes to Financial Statements. See Notes to
Financial Statements.
8
<PAGE>
- ----------------------------------------------------------
THE ASIA PACIFIC FUND, INC.
Notes to Financial Statements
(Unaudited)
- ----------------------------------------------------------
The Asia Pacific Fund, Inc. (the 'Fund') is a diversified,
closed-end,
management investment company. The Fund's investment
objective is to achieve
long-term capital appreciation through investment primarily
in equity securities
of companies in the Asia Pacific countries.
Note 1. Accounting The following is a summary
Policies of significant accounting
policies followed by the Fund
in the preparation
of its financial statements.
Securities Valuation: Investments are stated at value.
Investments for which
market quotations are readily available are valued at the
last reported sales
prices. If there is no sales price or reliable market
quotation on the date of
valuation, then investments are valued at the last bid price
quoted on such date
or at fair value as determined in good faith by or under the
direction of the
Fund's Board of Directors.
Under procedures established by the Fund's Board of
Directors the valuation
of the Malaysian position was reduced by 20 percent
effective September 30, 1998
and was further reduced to 30 percent effective November 6,
1998.
Short-term securities which mature in more than 60 days
are valued at current
market quotations. Short-term securities which mature in 60
days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements
with U.S. financial
institutions, it is the Fund's policy that its custodian
take possession of the
underlying securities, the value of which exceeds the
principal amount of the
repurchase transaction, including accrued interest. To the
extent that any
repurchase transaction exceeds one business day, the value
of the collateral is
marked-to-market on a daily basis to ensure the adequacy of
the collateral. If
the seller defaults, and the value of the collateral
declines or if bankruptcy
proceedings are commenced with respect to the seller of the
security,
realization of the collateral by the Fund may be delayed or
limited.
Foreign Currency Translation: The books and records of the
Fund are maintained
in United States dollars. Foreign currency amounts are
translated into United
States dollars on the following basis:
(i) market value of investment securities, other assets
and liabilities--at
the closing rate of exchange.
(ii) purchases and sales of investment securities, income
and expenses--at
the rate of exchange prevailing on the respective dates
of such transactions.
Although the net assets of the Fund are presented at the
foreign exchange
rates and market values at the close of the fiscal period,
the Fund does not
isolate that portion of the results of operations arising as
a result of changes
in the foreign exchange rates from the fluctuations arising
from changes in the
market prices of securities held at fiscal period end.
Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates
from the
fluctuations arising from changes in the market prices of
portfolio securities
sold during the fiscal period. Accordingly, these realized
foreign currency
losses are included in the reported net realized losses on
investment
transactions.
Net realized losses on foreign currency transactions
represent net foreign
exchange losses from sales and maturities of short-term
securities, holding of
foreign currencies, currency gains or losses realized
between the trade and
settlement dates on security transactions, and the
difference between the
amounts of dividends, interest and foreign taxes recorded on
the Fund's books
and the U.S. dollar equivalent amounts actually received or
paid. Net currency
gains and losses from valuing foreign currency denominated
assets, other than
investment securities, and liabilities at fiscal period end
exchange rates are
reflected as a component of unrealized appreciation on
investments and foreign
currencies.
Foreign security and currency transactions may involve
certain considerations
and risks not typically associated with those of U.S.
companies as a result of,
among other factors, the level of governmental supervision
and regulation of
foreign securities markets and the possibility of political
or economic
instability.
Security Transactions and Net Investment Income: Security
transactions are
recorded on the trade date. Realized and unrealized gains
and losses from
security and foreign currency transactions are calculated on
the identified cost
basis. Dividend income is recorded on the ex-dividend date,
and interest income
is recorded on an accrual basis. Expenses are recorded on
the accrual basis
9
<PAGE>
which may require the use of certain estimates by
management.
Dividends and Distributions: Dividends from net investment
income, if any, are
declared and paid at least annually. The Fund will
distribute at least annually
any net capital gains in excess of net capital loss
carryforwards. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are
determined in
accordance with income tax regulations which may differ from
generally accepted
accounting principles.
Taxes: It is the Fund's intention to continue to meet the
requirements of the
U.S. Internal Revenue Code applicable to regulated
investment companies and to
distribute all of its taxable income to shareholders.
Therefore, no federal
income tax provision is required.
Withholding taxes on foreign dividends, interest and
capital gains have been
provided for in accordance with the Fund's understanding of
the applicable
country's tax rules and rates.
Reclassification of Capital Accounts: The Fund accounts for
and reports
distributions to shareholders in accordance with the
American Institute of
Certified Public Accountants' Statement of Position 93-2:
Determination,
Disclosure and Financial Statement Presentation of Income,
Capital Gain, and
Return of Capital Distributions by Investment Companies. The
effect of applying
this statement was to decrease undistributed net investment
income and increase
accumulated net realized losses on investments and foreign
currency transactions
by $279,595 for differences in the treatment for book and
tax purposes of
certain transactions involving foreign securities,
currencies and withholding
taxes. Net investment income, net realized gains and net
assets were not
affected by this change.
Note 2. Investment The Fund has a manage-
Management and ment agreement with Bar-
Administration ing International Invest-
Agreements ment (Far East) Limited
(the 'Investment Manager') and
an administration
agreement with Prudential Investments Fund Management LLC
(the 'Administrator').
The Investment Manager is an indirect, wholly owned
subsidiary of ING N.V.
The investment management fee is computed weekly and
payable monthly at the
following annual rates: 1.10% of the Fund's average weekly
net assets up to $50
million, 0.90% of such assets between $50 million and $100
million and 0.70% of
such assets in excess of $100 million based upon the Fund's
average weekly net
assets. The administration fee is also computed weekly and
payable monthly at an
annual rate of 0.25% of the Fund's average weekly net
assets.
Pursuant to the agreements, the Investment Manager
provides continuous
supervision of the investment portfolio and the
Administrator provides occupancy
and certain clerical and accounting services for the Fund.
Both the Investment
Manager and the Administrator pay the cost of compensation
of certain directors
and officers of the Fund. The Fund bears all other costs and
expenses.
Note 3. Portfolio Purchases and sales of
Securities investment securities, other
than short-term investments,
for the six months
ended September 30, 1998 aggregated $42,972,869 and
$40,761,340, respectively.
The United States federal income tax basis of the Fund's
investments at
September 30, 1998 was $152,292,863 and, accordingly, net
unrealized
depreciation for federal income tax purposes was $28,842,637
(gross unrealized
appreciation--$6,220,780; gross unrealized depreciation--
$35,063,417).
Note 4. Borrowings The Fund has a credit
agreement with an unaffiliated
bank. The borrowing
limitation under this agreement is $70,000,000. Drawings may
be made for periods
of one, two or three months and interest is accrued daily
and payable at the end
of the loan period. The Fund had no loans outstanding for
the six months ended
September 30, 1998.
Note 5. Capital There are 30 million shares
of $0.01 par value common
stock authorized. At
September 30, 1998 there was 18,930,333 shares issued and
outstanding.
10
<PAGE>
- ------------------------------------------------------------
- --------------------
THE ASIA PACIFIC FUND, INC.
Financial Highlights
(Unaudited)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended March 31,
September 30,
- ------------------------------------------------------------
- -
Per Share Operating Performance: 1998
1998 1997 1996 1995 1994
-------------
- -------- -------- -------- -------- -------
- -
<S> <C>
<C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 9.19
$ 13.90 $ 14.87 $ 13.55 $ 16.29 $
13.11
-------------
- -------- -------- -------- -------- -------
- -
Net investment income (loss)............. 0.05
0.12 0.06 0.05 -- (0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................... (2.55)
(4.14) (0.53) 1.91 0.38 7.41
-------------
- -------- -------- -------- -------- -------
- -
Total from investment operations......... (2.50)
(4.02) (0.47) 1.96 0.38 7.36
-------------
- -------- -------- -------- -------- -------
- -
Less dividends and distributions:
Dividends to shareholders from net
investment income...................... --
(0.12) -- (0.04) (0.02) --
Distributions in excess of net investment
income................................. --
(0.16) -- -- -- --
Distributions paid to shareholders from
realized gains on investments and
foreign currencies..................... --
(0.41) (0.50) -- (3.10) (3.30)
-------------
- -------- -------- -------- -------- -------
- -
Total dividends and distributions........ --
(0.69) (0.50) (0.04) (3.12) (3.30)
-------------
- -------- -------- -------- -------- -------
- -
Capital charge in respect of issuance of
shares................................. --
- -- -- (0.60) -- (0.88)
-------------
- -------- -------- -------- -------- -------
- -
Net asset value, end of period........... $ 6.69
$ 9.19 $ 13.90 $ 14.87 $ 13.55 $
16.29
-------------
- -------- -------- -------- -------- -------
- -
-------------
- -------- -------- -------- -------- -------
- -
Market value, end of period.............. $ 5.00
$ 9.00 $ 11 1/2 $ 14 1/4 $ 14 1/8 $ 17
3/4
-------------
- -------- -------- -------- -------- -------
- -
-------------
- -------- -------- -------- -------- -------
- -
Total investment return(a)............... (44.44)%
(16.07)% (16.18)% 1.16% (3.65)% 44.31%
-------------
- -------- -------- -------- -------- -------
- -
-------------
- -------- -------- -------- -------- -------
- -
Ratios to Average Net Assets:
Expenses (including loan interest
expense)............................... 1.82%(c)
1.56% 1.63% 1.58% 2.06% 2.37%
Expenses (excluding loan interest
expense)............................... 1.82%(c)
1.56% 1.57% 1.53% 1.72% 1.72%
Net investment income (loss)............. 1.45%(c)
0.99% 0.43% 0.43% -- (0.33)%
Supplemental Data:
Average net assets (000 omitted)......... $ 138,688
$220,857 $275,702 $242,487 $214,527
$193,116
Portfolio turnover rate.................. 35%
54% 43% 23% 48% 101%
Net assets, end of period (000
omitted)............................... $ 126,707
$174,019 $262,693 $281,057 $192,009
$228,374
Total debt outstanding at end of period
(000 omitted).......................... --
- -- -- $ 20,000 -- $ 40,000
Asset coverage(b)........................ --
- -- -- $ 15,053 -- $ 6,709
</TABLE>
- ---------------
(a) Total investment return is calculated assuming a
purchase
of common stock at the current market value on
the first day and a sale at the current market value
on the last day of each fiscal period reported.
Dividends and distributions are assumed, for purposes
of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan.
These calculations do not include brokerage
commissions. Total returns for periods of less than a
full year are not annualized.
(b) Per $1,000 of debt outstanding.
(c) Annualized.
Contained above is selected data for a share of
common stock outstanding, total investment return,
ratios
to average net assets and other supplemental data for
the
periods indicated. This information has been
determined based upon information provided in the
financial statements and market price data for the
Fund's shares.
See Notes to Financial Statements.
11
<PAGE>
Supplemental Proxy Information
The Annual Meeting of Shareholders of The Asia Pacific
Fund, Inc. (the
'Fund') was held on Thursday, July 9, 1998 at the offices of
Sullivan &
Cromwell, 125 Broad Street, New York, New York. The meeting
was held for the
following purposes:
(1) To elect three Directors to serve as follows:
Director Class
Term Expiring
------------------------------ ----- ---
- ----- --------
David J. Brennan III 3
years 2001
Robert F. Gunia III 3
years 2001
Don G. Hoff III 3
years 2001
Directors whose term of office continued beyond this
meeting are
David G.P. Scholfield, Olarn Chaipravat, Michael J.
Downey,
Douglas Tong Hsu, Robert H. Burns and John A. Morrell .
(2) To ratify the selection of Deloitte & Touche LLP as
independent public
accountants for the fiscal year ending March 31, 1999.
(3) To transact such other business as may properly come
before the meeting or
any adjournment thereof.
The results of the proxy soliciation on the above matters
were as follows:
<TABLE>
<CAPTION>
Votes Votes Votes
Director/Matter
For Against Withheld Abstentions
- ------------------------------------------------------- --
- --------- --------- -------- -----------
<S>
<C> <C> <C> <C>
(1) David J. Brennan
14,741,254 0 593,489 --
Robert F. Gunia
14,799,688 0 535,055 --
Don G. Hoff
14,796,781 0 537,421 --
(2) Ratification of Deloitte & Touche LLP as
independent accountants
14,872,523 315,798 146,421 --
</TABLE>
12
<PAGE>
Directors
Don G. Hoff, Chairman
David J. Brennan
Robert H. Burns
Olarn Chaipravat
Michael J. Downey
Robert F. Gunia
John A. Morrell
Douglas Tong Hsu
David G. P. Scholfield
Officers
Ronald G. M. Watt, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
Vasso-Athene Spanos, Assistant Secretary
Investment Manager
Baring International Investment (Far East)
Limited
1901 Edinburgh Tower
15 Queen's Road Central
Hong Kong
Administrator
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
The accompanying financial statements as of
September 30, 1998
were not audited and, accordingly, no opinion is
expressed on them.
This report, including the financial
statements herein, is
transmitted to the shareholders of The Asia
Pacific Fund, Inc. for
their information. This is not a prospectus,
circular or
representation intended for use in the purchase
of shares of the
Fund or any securities mentioned in this report.
The Asia Pacific Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
For general information on the Fund, please call
(toll-free) Dewe
Rogerson Inc., our shareholders' servicing agent
toll-free at:
(888) 4-ASIA-PAC
The Fund's Web Site address is:
www.asiapacific.com
044901106
